Shareholder Primacy Undercutting Capitalism… AND Democracy.

The NYTimes David Leonardt, whose columns often miss the mark, hit the nail on the head with a column that appeared in yesterday’s paper titled “A CEO Who’s Scared for America”. The op ed piece profiled Peter Georgescu — a refugee who became C.E.O. of the advertising firm Young & Rubicam. For the past several years, Mr. Georgescu has written extensively about the demise of capitalism, which he traces back to the 1970s:

Things began to change after the 1970s. Stakeholder capitalism — which, Georgescu says, optimized the well-being of customers, employees, shareholders and the nation — gave way to short-term shareholder-only capitalism. Profits have soared at the expense of worker pay. The wealth of the median family today is lower than two decades ago. Life expectancy has actually fallen in the last few years. Not since 2004 has a majority of Americans said they were satisfiedwith the country’s direction.

“Capitalism is a brilliant factory for prosperity. Brilliant,” Georgescu says. “And yet the version of capitalism we have created here works for only a minority of people.”

Shareholder primacy (aka Shareholder-only capitalism), Milton Friedman’s mental construct that was promoted by Lewis Powell in a memo he wrote in 1973, is the basis for the pro-business libertarian movement that eroded funding for government at all levels. When it was combined with Watergate, the rise of Reagan-omics, and Grover Nordquist’s takeover of the GOP we find our selves with gutted regulatory agencies, crumbling infrastructure, underpaid workers, a shredded safety net, and underfunded public schools… but the billionaire class is doing well. The unfettered drive for profit at the expense of the well-being of employees and voters can only stop when faith is restored in government at all levels— an uphill battle given the lack of resources now available thanks to tax cuts.

I’m glad that more and more writers are citing the shift away from the “old” version of regulated capitalism (aka stakeholder capitalism) toward the new brand of unregulated capitalism which narrowly shifts all the money in one direction: upward!